New spark: the release of the white paper has re-ignited the debate on renewable energy targets. Photo: Greg McKenzie

WHILE Australia's Energy white paper released this week left many observers wondering how and when aspirations would be matched by hard policy choices, Climate Change Minister Greg Combet moved to fill the void on one looming decision of wide interest to the electricity sector.

Mr Combet said on Friday he was "a strong supporter" of the renewable energy target (RET) now under review.

"That is a pre-eminent consideration for the government — that investors in the renewable energy sector can have the confidence to commit the funds that are necessary to achieve our target," Mr Combet said. "This is forefront of my mind."

His comments will calm worries among renewable energy hopefuls that the government might bow to pressure from the major fossil fuel-based power companies, such as EnergyAustralia.

The latter wants the mandated target altered to prevent it exceeding the 20 per cent share of electricity from wind, solar and other renewable sources by 2020. Tinkering would place in doubt as much as $19 billion in renewable energy investments between now and the end of the decade, backers of the current settings say.

"The review of Australia's renewable energy target will be the next major energy policy decision required from the government, and it is the strong view of the industry that it should remain largely unchanged," Clean Energy Council policy director Russell Marsh said. "The signs from minister Combet are extremely encouraging and we hope they will be reflected in the government's final decision."

The Climate Change Authority is due to submit its recommendations on the RET review by the end of the year.

Mr Combet made clear his stance even if this week's landmark white paper, which was intended to guide energy policies, left many key issues vague.

Household and business consumers, who have seen their retail electricity bills soar more than 40 per cent in three years, will get little reassurance that governments at federal or state level will be able rein in the increases in the near term.

Subsidies to support renewables and the introduction of the carbon tax cop some of the flak for price increases, but most of that is overdone, said Mike Sandiford, director of the Melbourne Energy Institute.

The cost of generating electricity is about a quarter of the final bill, with the ratio rising to about 30 per cent when the carbon price is included, Mr Sandiford said.

"That cost is dominated by distribution, and that is the challenge in the electricity network," he said.

While the energy report generally avoids assigning blame for rising bills, it does note that network charges account for 51 per cent of an average residential power bill.

Tony Wood, director of the energy program at the Grattan Institute, said the white paper was short on details, particularly when it came to curbing network spending.

"What are the specific things you're going to do, cut investments in networks?" he said. For instance, the Australian Energy Regulator offered network companies a higher risk rating than warranted given that their businesses are effectively low-risk entities, he said.

"The difference is hundreds of millions of dollars a year."

The white paper identified the electricity sector as "perhaps" facing the greatest long-term change of the energy groups, and little wonder.

For one thing, government forecasters are battling to keep up with market changes, particularly a recent slide in demand.

The Australian Energy Market Operator (AEMO) said demand was likely to remain steady at its current level during 2012-13 "before returning to growth over the remainder of the decade".

One recent innovation is the AEMO is no longer relying on the power sector to supply demand predictions.

Even so, the gap between high and low growth forecasts will be 34 terawatt hours by 2020 — or slightly more than Victoria's entire annual average demand so far this year.

As a result, the most costly part of the energy sector — ensuring that the 1 per cent or so of the year that requires peak supply is met — will continue to grow as much as 2.5 per cent annually in some states in the network "in the absence of market reforms".

Those market reforms, though, will find stout resistance in Queensland and New South Wales.

As AAP reported this week, the NSW government has a logic to its reluctance to privatise or alter its revenue machines.

Dividends paid from the seven government-owned power corporations rose to $866 million last financial year, about a third higher than a year earlier.

The Grattan Institute intends to fill some of the gaps in the white paper, with plans to release a report examining network returns in coming weeks.

At the very least, the regulator should review the investments more than once every five years as is currently the approach, Mr Wood said.

"It's like steering a ship," he said. "You don't wait until you are miles off course before changing direction."